Netizen 24 CAN: Morneau has promised to 'indemnify' Trans Mountain. No one really knows what that means

Morneau has promised to 'indemnify' Trans Mountain. No one really knows what that means

Canada May 16, 2018 12:25 pm Morneau has promised to âindemnifyâ Trans Mountain. No one really knows what that means

Finance Minister Bill Morneau says if Kinder Morgan wants to abandon plans to build the Trans Mountain pipeline expansion, there are plenty of other investors out there willing to take up the cause.

X

- A A + Listen

The federal government will âindemnifyâ the Trans Mountain pipeline expansion to ensure that the project is completed and Canada can sell its oil on international markets, Finance Minister Bill Morneau said on Wednesday.

And if Kinder Morgan abandons plans to build it, the federal government stands ready to offer up that guarantee to other investors willing to step to the plate, the minister added.

The announcement comes just weeks away from the May 31 deadline the energy infrastructure giant has given Ottawa to solve the legal hurdles facing the project. Faced with stern opposition from the B.C. government of Premier John Horgan, the company paused all non-essential work on its $7.4-billion plan to nearly triple the capacity of its Trans Mountain pipeline, which carries Alberta crude from Edmonton to Burnaby.

âWe are willing to indemnify the Trans Mountain expansion against unnecessary delays that are politically motivated,â Morneau said. âIf Kinder Morgan is not interested in building the project â" we think plenty of investors would be interested in taking on this project, especially knowing that the federal government believes it is in the best interest of Canadians and is willing to indemnity to make sure it gets built.â

WATCH: Ottawa reaffirms support for Trans Mountain pipeline

But the finance minister was scant on details when asked about wha t, exactly, Ottawa is prepared to do to back the project, leaving plenty of questions unanswered. Hereâs what we still donât know:

How big a cheque is the government prepared to write?

Morneau did not say. The finance minister didnât discuss whether taxpayersâ exposure could be in the millions or billions of dollars, or whether Ottawa is prepared to impose a cap on it.

How close is the government to striking a deal with Kinder Morgan?

Morneau refused to discuss the details of the governmentâs discussions with the company, saying simply that ânegotiations are ongoing.â

However, the fact that the announcement came on the very day that Kinder Morgan is holding its annual meeting was widely interpreted as an effort by Ottawa to ratchet up the pressure on the company ahead of the May 31 deadline. The same goes for Morneauâs allusion to the existence of other investors willing to take on the pipeline expan sion.

READ MORE: Trans Mountain pipeline: Some of the main arguments for and against it

Can another investor really step in to expand Kinder Morganâs pipeline?

The idea that other investors would step in to finish the work on Trans Mountain has its skeptics. After all, the current plan is to build a pipeline running parallel to Kinder Morganâs existing infrastructure. Itâs unclear how another actor could fill the companyâs shoes.

What form will the governmentâs financial support take?

Morneau didnât elaborate on what indemnity means. Asked about whether the government could take an equity stake in the Trans Mountain expansion, which would allow it to share in any profits from the project, the minister didnât explicitly rule out that option.

WATCH: Morneau outlines three steps being taken to promote Trans Mountain

Is Ottawa going to cover costs stemming specifically from Horganâs opposition or challenges from other actors as well?

Morneau drew a clear link between Horganâs efforts to stonewall the pipeline and Ottawaâs decision to intervene.

âWe believe that what Premier Horgan has done is unconstitutional,â the finance minister told reporters.

Ottawa is offering indemnity against âthat specific risk,â he noted, adding that no private investor can be expected to solve a challenge coming from a provincial government refusing to allow an infrastructure process to proceed despite federal jurisdiction.

But the question remains of how the government would, in practice, distinguish between extra costs incurred by Kinder Morgan because of opposition from Horgan or other hurdles like protests and legal challenges from Aboriginal groups.

Does this create a precedent for government intervention in other projects?

Another question is whether the Trudeau governmentâs decision to shore up Trans Mountain will create the expectation that it will do the same for others.

Morneau repeatedly called the current pipeline stalemate âan exceptional situation,â likely an attempt to telegraph that Ottawa isnât opening its chequebook to every investor stuck with an expensive and controversial infrastructure project.

Some analysts believe thereâs a clear economic case for the government to step in.

âWith costs rising because of delays caused by the B.C. gov ernment, Kinder Morganâs prospect of making money is looking dicey. That creates a disconnect between the private incentive of the company and whatâs best for society,â Benjamin Dachis associate director of research at the C.D. Howe Institute told Global News via email.

However, he added, âwe need to remember that governments should not be in the pipeline business.â

The best way for Ottawa to provide support would be an arms-reach, short-term loan to Kinder Morgan to help it cope financially with political uncertainty. The loan would need to be repaid at the end of construction, Dachis said.